It is only when one reads such a book as Francis Parkman's "Oregon Trail"
that one fully realizes the vast transformation which has taken place within
little more than half a century in the great Northwestern territory beyond
the Mississippi and the Missouri. In that fascinating history we read of
the romantic and thrilling experiences of Parkman and his companions in
their summer journey across the plains of Nebraska and through the mountain
ranges of Wyoming, Montana, and Oregon. We read of their hairbreadth escapes
from the Indians; their chase of the buffalo and other wild animals of
the far Western country; of the wearisome weeks that they spent in crossing
the deserts where absolute loneliness reigned; and finally of their arrival,
after months of hardship, in the vast Oregon country, which with its great
natural resources, splendid climate, and large extent has come to be known
in these modern days as the Empire of the Northwest.

It was to penetrate and bring this great virgin region within reach
of the East that the Northern Pacific Railroad Company was chartered by
Congress in 1864, just prior to the closing of the Civil War. During this
same period the Union Pacific route was being surveyed, and the first ground
was broken in December, 1863, for the line which was later to connect Omaha
with San Francisco.

Like the Union Pacific charter, that of the Northern Pacific also contained
an extensive land grant. From the modern viewpoint, such land grants look
colossal, but in those days the general opening up and development of the
Western country had progressed to so slight an extent that the significance
of giving away millions of acres of the public lands to encourage a precarious
railroad enterprise was then no more than the passing over to capitalists
today of exclusive rights in extensive tracts of territory in Brazil and
the other South American Republics. Even these great opportunities to acquire
almost an empire of fertile lands or rich forests were not as a rule looked
upon as attractive enough to tempt capital into the wilderness. The old
saying that capital is the most timid thing in the world and does not like
pioneering is strongly emphasized by such instances as this, and no doubt
in 1864 the enormous grants of free land made by Congress did not appear
especially attractive to the man who had money to invest.

Whatever the public attitude may have been, the Act of Congress of July
2, 1864, creating the Northern Pacific Railroad, gave that Company the
right to construct a line from some point on Lake Superior, either in Minnesota
or in Wisconsin, westward and north of latitude 45 degrees, to or near
Portland, Oregon. The land grant consisted of forty alternate sections
of public land for each mile within the Territories penetrated and twenty
alternate sections within the States through which the railroad might pass.

The hazardous character of this undertaking will be realized when it
is remembered that at this time no railroad had yet penetrated the Rocky
Mountains; that the entire railroad system of the United States was less
than 40,000 miles; and that west of the Mississippi there was no mileage
worth mentioning. It was still less than a generation since Parkman and
his companions had made their four months' journey from St. Louis to the
mouth of the Columbia River, and between the fringe of civilization along
the Pacific slope and the region about Chicago and St. Louis lay almost
a third of the continent uninhabited, undeveloped, and unknown. The scheme
languished for several years until finally, in 1869, the firm of Jay Cooke
and Company of Philadelphia undertook to raise the necessary capital.

The story of the Northern Pacific for the next few years was closely
bound up with that of Jay Cooke, who was one of the most conspicuous characters
of his time in the financial world. He was a man of commanding personality,
great energy, unusual resourcefulness, and with a large personal following.
He had built his reputation through his great success in financing United
States government loans during the Civil War. He now undertook to raise
more than one hundred million dollars to carry through the Northern Pacific
enterprise. He achieved remarkable success for a time and within three
years had built over five hundred miles of the main line to the Pacific
coast. But the outbreak of the Franco-Prussian War and the consequent financial
stringency abroad, the difficulty of marketing bonds on an uncompleted
enterprise, combined with the poor showing made by those sections of the
line completed and in operation, brought matters to a crisis, and in September,
1873, Jay Cooke and Company were obliged to close their doors. The affairs
of the railroad were so closely involved with those of the banking firm
that, although strenuous efforts were adopted to save the railroad, its
revenues were inadequate. As a result, in April, 1874, General Lewis Cass
was appointed receiver.

The uncompleted property was operated for some years thereafter under
the protection of the courts and no plan of reorganization was devised
until 1879. During the receivership only a moderate amount of additional
mileage was constructed, and it was not until many years had passed that
the system penetrated the mountains and reached the Pacific coast. But
when the new company took possession in 1879, aggressive building was resumed,
and for a time it looked as though the project would be promptly finished.
However, in 1882, the company still had about one thousand miles to construct
in order to complete its main artery. At this time financial difficulties
appeared, and the days of stress were tided over only by the help of a
syndicate and the Oregon and Transcontinental Company.

With the formation of the Oregon and Transcontinental Company begins
the regime of Henry Villard, the dominating factor in Northern Pacific
affairs for many years afterward. Some years before, Villard, who had long
been interested in Western railroad enterprises and who had become prominent
through his activities in connection with the Kansas and Pacific Railway,
had succeeded in forming the Oregon Railway and Navigation Company as a
combination of steamboat lines operating on the Willamette and Columbia
rivers in Oregon, with an ocean line connecting Portland and San Francisco.
A connecting railroad line, which had been built to Walla Walla in southeastern
Washington, penetrated a portion of the territory through which the Northern
Pacific was projected. In 1880 a contract was arranged between the two
companies whereby the Oregon Railway and Navigation Company, in order to
share in the traffic, undertook to construct a line eastward to meet the
Northern Pacific line at the mouth of the Snake River. This arrangement
would allow the Northern Pacific to run its trains into Portland and would
obviate the necessity of constructing its own road into that city.

In spite of this arrangement, Villard feared that the Northern Pacific
Company might decide, after all, to build its own line to Portland as soon
as it was able to finance the project. It was for the purpose of preventing
this move that he formed the Oregon and Transcontinental Company, a holding
corporation which promptly acquired, in the open market and by private
purchases, a dominating interest in the Northern Pacific Railroad. At the
same time Villard placed the control of the Oregon Railroad and Navigation
Company in the hands of the new Transcontinental.

Villard thus came to control the entire Northern Pacific system and,
backed by the Deutsche Bank of Berlin and other German and Dutch interests,
at once began an aggressive policy of expansion and development. The business
of the system developed rapidly. The main line through to the Pacific coast
was now in operation, and the entire system amounted to about 2300 miles
of road. But Villard followed a financial policy which was not sound and
paid dividends without justification. In a short time the company consequently
found itself financially embarrassed.

As a result of financial losses in 1884, Villard was obliged to retire
from active control of the properties. But in 1887 he once more got possession
of the Northern Pacific with German capital and succeeded in arranging
a lease of the Oregon Short Line, which had been developed by the Union
Pacific interests, embracing a cross-country road from its main lines in
Wyoming northward into Oregon and Washington. At the same time the interest
of the Transcontinental Company in the Oregon Railway and Navigation Company
was linked with the Oregon Short Line Company. These transactions, however,
still left the Transcontinental Company in control of the situation, as
it retained its majority ownership of Northern Pacific Railroad stock.

For the next few years the Northern Pacific did not follow a policy
of rapid expansion. Other trunk lines, such as the Union Pacific, Rock
Island, Santa Fe, Burlington, and North Western, were all growing and keeping
pace with the rapid settlement of the West; but the Northern Pacific in
these years simply rested content with its position as a single track transcontinental
route having but few branches. Its only important extension was made by
acquiring the Wisconsin Central Railroad, which gave the company a line
between St. Paul and Chicago and a valuable and important entrance into
the latter city. It was expected that, with this accession, the affairs
of the company would be permanently established on a sound basis, but the
overliberal policy of paying out practically all the surplus in dividends
was continued in the face of large increases in fixed charges.

Early in 1892 it began to be rumored that the Northern Pacific was not
in so easy a financial position as had been assumed. The stockholders took
alarm; and the committee which was appointed to investigate the situation
discovered a deplorable state of affairs. As a result of the severe criticism
of Villard's policy, steps were at once taken to oust him from control,
but without success until June, 1893. Two months later, receivers were
appointed who discovered that the company was insolvent and had no funds
to pay quickly maturing obligations. Receivers were appointed also for
most of the branch lines, including the Wisconsin Central system. The Oregon
Short Line, which was tied through guarantees with the Union Pacific although
leased to the Northern Pacific, was involved in the general crash but was
later separately reorganized.

To rehabilitate the Northern Pacific Railroad effectively was a difficult
problem. Its debt was enormous; its roadbed and rolling stock had been
neglected; and, as a result of the recent crash, its valuable feeders on
both east and west, the Wisconsin Central and the Oregon properties, were
removed from its control. Besides these adverse conditions, competition
of a serious nature was looming up. James J. Hill had for many years been
quietly developing the Great Northern Railway. This great system he had
financed in an extremely conservative manner; he had extended it through
territory where construction costs were low; and he had secured control
of branches and feeders which might have come under the sway of the Northern
Pacific had that company been more farsighted. Hill had operated his road
from the beginning at very low cost; he had kept its credit high; and even
in the period of financial depression he had reported large profits and
had paid substantial dividends on his stock. With such a competitor in
the field, it really looked for a while as though the Northern Pacific
could have no future whatever.

Finally, in May, 1895, a plan sponsored by Edward D. Adams, representing
New York interests and those of the Deutsche Bank of Berlin, proposed a
practical merger with the Great Northern Railroad Company: the old stock
and bondholders were to make all the sacrifices and to supply all the new
capital, and the Great Northern was then to be presented with half the
stock of the new company, in consideration for which it was to guarantee
the new Northern Pacific bonds. The situation was somewhat similar to that
which existed in New York State as early as 1868 when Commodore Vanderbilt
had achieved his great reputation as a wizard at railroading by acquiring
the Harlem and Hudson River railroads and by forcing the New York Central
lines to terms. James J. Hill had become a modern wizard, and the only
hope for the Northern Pacific seemed to be to lay the road at his feet
and ask him to do with it what he had done with the Great Northern—make
it a "gold mine."

This plan, however, met with too much opposition and was abandoned.
During the following year a new plan, backed by both the American and the
German interests, secured the strong cooperation and endorsement of J.
P. Morgan and Company. This was the first instance of Morgan's entry into
railroad reorganization in the West. During the previous few years he had
been increasing his reputation as a reorganizer of Eastern railroad properties,
and by this time he had successfully organized or was rehabilitating the
Erie, the Reading, the Baltimore and Ohio, the Southern, and the Hocking
Valley systems. But he had kept clear of the far Western field and had
definitely refused to reorganize the Union Pacific on the ground that its
territory was too sparsely settled and that there was little hope for its
future, especially as its partial control by the United States Government
made any reorganization extremely difficult. The new plan for the Northern
Pacific was carried out with no regard to the Hill interests the old stockholders
were heavily assessed; all bondholders were forced to make sacrifices;
the Wisconsin Central lines were entirely eliminated and separately reorganized;
and the Oregon lines were dissociated from the Northern Pacific and afterwards
returned to the control of the new Union Pacific.

While the new Northern Pacific as reorganized in 1898 came directly
under Morgan's control and was immediately classed as a Morgan property,
it did not remain exclusively such for very long. In the promotion and
development of the Great Northern system; Hill had hitherto maintained
an independent position so far as banking alliances were concerned, but
he now began to develop closer relations with the Morgans and became heavily
interested in the First National Bank of New York, an institution which
for many years had been more or less directly identified with the Morgan
interests. On more than one occasion thereafter the banking firm of J.
P. Morgan and Company acted as financial agent for the Great Northern.

Soon after the reorganization of the Northern Pacific, it became known
that Hill had acquired an important interest in the property, and as time
went on this interest was substantially increased. Within a year or two
the Northern Pacific began to be classed as one of the Hill lines. With
a substantial Hill representation on the board of directors and a managerial
policy which was clearly inspired by Hill, the company now entered upon
a new stage in its career.

The outstanding dramatic event in the story of the modern Northern Pacific
was the famous corner which occurred in the spring of 1901 as a result
of a contest between the Hill and the Harriman interests for the control
of the property. The details of this operation, which sent the price of
Northern Pacific stock up to $1000 a share and precipitated a stock-market
panic, form part of the story of the Harriman lines. The contest resulted
in the formation of the Northern Securities Company, a corporation of $400,000,000
capital, devised as a holding company under the joint control of the Hill
and Harriman interests, for the purpose of retaining a majority of the
stocks of the Northern Pacific and the Great Northern.

The Hill interests, jointly with the Morgan control of the Northern
Pacific, had been quietly accumulating stock in the Chicago, Burlington
and Quincy Railroad, and Harriman felt that there was grave danger to the
Union Pacific in this move, as the Burlington had already penetrated into
the Union Pacific territory and might at any time start to build through
to the coast its own line parallel to the Union Pacific. Harriman consequently
began to buy up Northern Pacific stock in the open market and thus, together
with the efforts of the Hill and Morgan people to retain and strengthen
their control, brought about the corner.

The Northern Securities Company was designed to harmonize all interests
and to keep the control of the Burlington property jointly in the hands
of Harriman and Hill. But as the result of a suit under the Sherman AntiTrust
Act, this combination was declared illegal, and in 1904 the company was
dissolved. The final outcome of the situation was that the Northern Pacific,
sharing with the Great Northern the joint control of the Burlington lines,
was left indisputably in the hands of the Hill-Morgan group, where it has
ever since remained. These three great railroad systems, the Northern Pacific,
the Great Northern, and the Chicago, Burlington and Quincy, constituting
nearly twenty thousand miles of railroad, have been known ever since as
Hill lines.

Since the dramatic days of the Harriman-Hill contest the history of
the Northern Pacific system has been simply a striking reflection of the
growth in population and wealth of the great Northwest. The States through
which it operates have grown with astounding rapidity during the past two
decades; small cities have spread into great centers of manufacture and
trade; hundreds of smaller towns have sprung up; natural resources of untold
value have been developed. In the meanwhile the Northern Pacific has forged
ahead in its earnings and profits, and the stock of the road has come to
be known as one of the highest class of investment issues. Although new
competition appeared, in both the local and the through business of the
company—notably by the extension of the St. Paul system largely through
Northern Pacific territory to the Puget Sound region—the superior modern
business management of James J. Hill, backed by the strong resources of
the Morgan banking interests, made the Northern Pacific one of the standard
railroad systems of America.

Courtesy
The James J. Kelly Library of St. Gregory's University, Alev Akman.Scanned by Dianne Bean.Proofread by Stephanie Manke.